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Water and Sewer Fund Capital Analysis <br />Depreciation is required to fund replacement of worn out equipment and <br />infrastructure. <br />Capital Contributions consist of special assessment collections and connection <br />fees. These fees fund future expansion of the system. <br />The Water and Sewer Funds have been posting an operating loss for the last five <br />years. This means that adequate funds are not being reserved, based on the life <br />cycle of the capital items, for future replacement. <br />Capital Contributions have been significant enough to mitigate the shortfall in <br />most years; however, this results in a reduction of funds available for expansion <br />and inflation of costs. <br />An analysis of annual requirements, based on the replacement cost of the <br />capital items, indicates underfunding of capital reserves. <br />Water and Sewer Funds are well situated for short term needs and liquidity <br />requirements. <br />Recommendation: Small increase in both user charges to cover inflation on an <br />annual basis. <br />